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Legislative Council elections 2016

New breed of filibustering lawmakers could damage Hong Kong’s credit rating, Moody’s warns

Ratings agency says policymaking could be slowed by filibustering in legislature

PUBLISHED : Monday, 12 September, 2016, 6:06pm
UPDATED : Tuesday, 13 September, 2016, 12:31pm

The increased presence of anti-establishment politicians in Hong Kong’s newly elected Legislative Council is likely to further bog down government policymaking and could hurt the city’s credit rating, a top international agency warned on Monday.

It was the first such cautionary assessment of the political gridlock the city faces after the September 4 polls, with young localist winners vowing to ramp up the filibustering that paralysed government bills in the legislature for much of the past few years.

“With these [election] results, filibustering ... is likely to continue, a credit-negative development that will result in slow and less effective policymaking,” Moody’s said in a report issued on Monday.

Financial secretary John Tsang Chun-wah said on Tuesday morning that rating agencies should know Hong Kong in depth and how the government operated before coming to a conclusion.

“They should be fair to us,” he said.

He added that the government will communicate shortly with the new faces at Legco.

Moody’s put the city on “negative outlook” earlier this year, meaning it is likely to lower the current rating of Aa1 negative in the months ahead. A downgrade would mean the government has to pay more when borrowing on international markets.

The ratings agency also predicted further political friction that could intensify ahead of next year’s chief executive election.

Last week, the pan-democratic camp, along with radical localist groups, won 30 seats in the 70-member legislature – boosting the de facto opposition’s ranks by three more than at the previous polls.

That gives them veto power over matters of constitutional change, such as political reform and universal suffrage.

“Although the opposition is more fragmented after this election, the anti-establishment parties are likely to be unified in voicing their disagreement to the government’s approach to Hong Kong’s relationship with China under the one country, two systems policy,” Moody’s said.

In April, Marie Diron, lead writer of Moody’s’ March report that downgraded Hong Kong’s outlook, said the evolution of the city’s political dynamic would play a bigger role in its future ­ratings, as policy effectiveness was a key element affecting long-term fundamentals for a rating.

Standard and Poor’s, another of the “big three” credit ratings agencies, also revised the city’s sovereign ratings outlook from stable to negative earlier this year. The third agency, Fitch, warned that widening political divides could hurt the city’s economy.

Lawmaker-elect Raymond Chan Chi-chuen of People Power, a prolific filibusterer over the past two years, said legislators were in a “passive” position when it came to such tactics to block or delay government bills.

“If the government follows public opinion and tables bills and funding requests for which there is public consensus, we won’t need to filibuster,” he said.

He would only oppose controversial items such as “white-elephant” infrastructure projects, including cross-border railway funding and new town developments in the New Territories.

Student-leader-turned-lawmaker Nathan Law Kwun-chung said he would not oppose livelihood projects, only “bad laws” such as national security legislation and proposals rejected by the public.

Chinese University academic Stephen Wong Yuen-shan said the actual impact of a downgrade would be very limited, given the large government surplus.

“The borrowing costs are not 100 per cent related to a credit rating,” Wong said, adding that market confidence depended on more than just credit ratings.